In our previous article about XRP in Norwegian, we addressed what XRP is and compared it to Bitcoin. In this article, we will delve a bit deeper into some other aspects of XRP to enhance our customers' understanding of the blockchain.
The XRP Ledger, which keeps track of XRP transactions, has been in operation for over 10 years, with over 70 million transaction updates according to Ripple, the company developing the blockchain. At the inception of the blockchain, 100 billion XRP were issued, and over time, there will be a slightly smaller amount of XRP since no new XRP is being issued, and XRP transactions gradually decrease the total supply. Smaller units of XRP are referred to as drops, equivalent to 0.000001 XRP.
According to this article, most transactions will remove 10 drops of XRP from the total circulating XRP. Another important aspect of the XRP economy is that in 2017, Ripple placed 55 billion XRP into an account that will gradually release these XRP into circulation within the ecosystem, in a manner that can be calculated in advance. For more information, refer to this article. Generally, it can be said that the circulation of XRP is both predictable and that over time, the total amount of XRP will gradually decrease.
XRP is neither a Proof of Work nor a Proof of Stake protocol but, in simplified terms, is based on the consensus of a majority (80%) of validators agreeing on the inclusion of transactions in the blockchain. Because of this, blockchain entries consume minimal energy, and transactions are executed quickly (3-6 seconds). There are no direct rewards for validators creating new blocks on the blockchain, unlike other protocols. However, the approximately 107 current validators (according to this overview) have an interest in ensuring that the blockchain accurately records transactions since they themselves utilize the network for their own services. In practice, the validator list is smaller than 107 as each validator has a list of 34 unique nodes (UNL). If 20% or more of these nodes go offline (7 or more), the network will stop updating until more nodes come online to achieve 80% consensus. Based on this, one could argue that XRP is quite centralized, but it would be incorrect to say that it has no form of decentralization. For the purpose of XRP, as we mentioned in the previous article, to improve the SWIFT system, many would argue that XRP is sufficiently decentralized.
Another important area for XRP is that the company behind Ripple offers a complete platform for issuing, withdrawing, and managing digital currencies as a tool for central banks. Here, XRP ledger technology is used as a private ledger under the control of the digital currency issuer. The company has developed methods to easily integrate its solution with existing solutions banks use. In Ripple's 2020 whitepaper on CBDC, they claim that 80% of central banks are exploring the possibility of issuing such digital currencies.
ISO 20022 is a global standard for payment messages that, according to Ripple, is used by 70 countries and is estimated to support over 87% of global financial transactions. Having a common standard and language helps banks and financial institutions to interact faster and more efficiently. Swift, which is used for international transactions, will fully transition to ISO 20022 by 2025. An article recently looked at which cryptocurrencies are certified for this ISO standard, and among them are XRP and ADA, both of which are offered on NBX's trading platform.
All in all, XRP is an exciting cryptocurrency to follow, and it also shows that the degree of decentralization can match different use cases. Cheaper cross-border currency transfers will be a significant contribution from blockchain technology. When these transfers can also happen much faster than before, it can improve the accessibility and circulation of currencies worldwide, which can be seen as a positive development for the global economy. If you find XRP intriguing and want to trade this cryptocurrency, you can find it here on our trading platform.